In about 30 days, PVR Cinemas’ acquisition of Chennai-based SPI Cinemas will likely be completed, and the merger process will be wrapped up within nine to 12 months. With it, PVR will acquire a 71.7 per cent stake in SPI for Rs. 850 crores, in a cash-and-stock deal.
Exhibition chains eating up each other is not new. In the past, Carnival Cinemas took over 242 screens of Anil Ambani’s Big Cinemas for Rs. 700 crore. The Bengaluru-based group has also absorbed E-Square Cinemas, a Maharashtra-based multiplex chain. Inox Cinemas bought the Delhi-based Sathyam Cineplexes in July 2014 for Rs. 182 crores. SPI Cinemas has one instance of selling too – in 2015, it sold its uber-plush 11-screen multiplex Luxe in Phoenix Market City, Velachery, to Jazz Cinemas, a firm owned by VK Sasikala’s relatives.
Regarding the current merger, reports had surfaced as far back as 2015 that PVR had entered into talks with SPI for a proposed merger worth Rs 750 crores to Rs. 1,000 crores, but PVR subsequently denied all reports. SPI Cinemas, formerly known as Sathyam Cinemas, is the largest exhibitor in South India, with a presence across 10 cities through a network of 76 screens.
According to a press release issued by PVR Cinemas, Kiran Reddy and Swaroop Reddy, who head SPI cinemas, will remain with the company to provide ‘strategic guidance in integrating the company with PVR Cinemas’.
According to Mint, this is PVR’s third takeover in the recent past, after Cinemax in 2013 and DT Cinemas in 2016. According to the agreement with SPI, “PVR would acquire 222,711 equity shares of SPI Cinemas, constituting 71.7 per cent of the paid-up equity share capital of SPI, from existing shareholders for a total consideration of ₹633 crore.” PVR said in a statement, “It will also issue 1.6 million equity shares of PVR Ltd, constituting approximately 3.3 per cent of the diluted paid-up equity share capital of the company, pursuant to a scheme of amalgamation between SPI and PVR.” EY served as an adviser for the transaction.
Sathyam, the flagship property of SPI Cinemas, enjoys enormous goodwill among the people of Chennai. Like the memes say, Sathyam is not a theatre, it’s an “emotion”. It has consistently improved facilities for moviegoers, be it investing in technology or better F&B. It’s well-thought out initiatives at inclusivity have only added to its reputation. In February this year, the chain redesigned its iconic popcorn tubs with four artworks created by differently-abled people, in a bid to support them. It worked closely with Kai Rassi, an organisation, towards this. More recently, it launched SENS, which made movie-watching possible for children and adults with heightened sensory issues. This will be a monthly feature.
Predictably enough, following news of the acquisition, there have been rumbles on social media in Chennai and other cities where SPI has charmed its way into the audience’s hearts. Their biggest worry? Will PVR match up to the superior experience offered by SPI? And, there’s the emotional connect with a homegrown brand that has provided an international-level experience at reasonable prices. Compare this to PVR, which is known to charge Rs. 1,400 a ticket at its Director’s Cut in Delhi, for a premium movie watching experience. Until recently, when new tax rules kicked in, rates in Tamil Nadu across SPI properties were capped at Rs. 120, and some seats were available at the government-mandated price of Rs. 10 a ticket!
PVR is known for its expensive F&B counters too. A Mint report said the chain made every fourth rupee selling food and drinks. “In the first quarter of 2018-19, PVR earned Rs 202.71 crore from F&B sales, a jump of 23 per cent over the corresponding quarter the previous financial year. This high-margin segment constitutes about 30 per cent of PVR’s total quarterly revenue of Rs 684.36 crore.”
A recent article by Film Companion titled ‘Movie Audience!! Are you being robbed?’ talked about the dipping quality in movie projection, across chains. It goes on to describe how the author witnessed the Bollywood movie Newton being played out in completely different screening qualities at two different theatres owned by PVR.
The sour experience at PVR, which includes a regular delayed start to the movies, hasn’t been limited to movie-goers. Recently, Bollywood director Vikramaditya Motwane tweeted out his experience when he went to watch Wes Anderson’s Isle of Dogs at a PVR screen.
Hey @foxsearchlight. Do you know that they’re screening @isleofdogsmovie like this at @_PVRCinemas?
They’ve shrunk the image to make way for subtitles. I don’t know about you but I’m not okay with this. I paid to see a Wes Anderson film in it’s full screen glory, not this… pic.twitter.com/9WGBv6Ns5C— Vikramaditya Motwane (@VikramMotwane) July 13, 2018
PVR has also been known to hike ticket prices after takeovers. A 2014 Forbes article talks about how PVR increased the charge by 10 per cent at Pacific Mall located in Subhash Nagar, West Delhi, after the deal with Cinemax was completed.
Ajay Bijli, Chairman and Managing Director of PVR, was quoted by the Economic Times as saying about the SPI deal: “This transaction is a significant step in helping us achieve our vision of having 1000 screens by 2020.” The deal will make PVR the seventh largest cinema exhibitor in the world with a total screen count of 706 across 60 cities. PVR’s current tally of 47 screens across Tamil Nadu will rise to 89 once the deal materialises. The move will also ensure a rise in PVR’s overall screen portfolio in Tamil Nadu from 26 per cent to 35 per cent.
PVR’s aim to possess 1,000 screens is in keeping with a larger picture in mind. Having a considerable chunk of film exhibition in its kitty will put it in a position of advantage when it comes to negotiating with producers, reports Forbes. Currently, big studios such as YashRaj walk away with more than 50 per cent of the first week collections. With an increased screen portfolio, PVR predicts it can dictate terms when it comes to sharing box-office collections.
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The average occupancy rate of SPI stands at 51 per cent, a higher number compared to PVR’s 31.3 per cent. As per 2018 numbers, SPI generated revenue of Rs. 310 crores whereas PVR made Rs. 2,365 crores. The deal will make sure that PVR’s box office revenue from regional films will go up from 19 per cent to 22 per cent. The deal will also help diversify PVR’s content risk.
In a statement released on Monday, Kiran Reddy said: “Our intent is to combine best practices and learnings from two successful brands and use our combined strength to really, truly transform your moviegoing experience, at scale.” He also promised that the SPI culture will “continue to be what it always has been – passionate, pioneering and inclusive” and that it would “preserve” everything the audience loves about the chain. And so, hope floats that while there might be a chance of ownership, there will not be a change in a cinema chain’s much-loved character.
(With inputs from Subha J Rao)
Image Courtesy: Google